Both US presidential candidates—Hillary Clinton and Donald Trump—have presented their economic proposals to voters. How could each of these platforms impact the US economy—if they come to pass?
The economic policy visions of Secretary of State Hillary Clinton and Republican challenger Donald Trump are very different in both scope and scale. In the end, the success or failure of either proposal depends on how it’s translated into policy—or not—by working with Congress. Let’s look at how the stated proposals could impact the economy—and their odds of being enacted.
CLINTON’S ECONOMIC PLAN: MODEST SCALE
The economic plan of Democratic nominee Hillary Clinton is multifaceted, but it’s actually modest in its overall scale.
The tax proposals would raise an estimated $1.1 trillion in new revenue over a 10-year period. This revenue would help fund a wide range of programs and initiatives, including infrastructure (about $300 billion over five years), clean energy, education, healthcare and child care.
The changes in Secretary Clinton’s tax plan focus mainly on upper-income families. The plan includes a proposed 4% surcharge on income over $5 million, and a required floor of 30% in federal taxes for incomes over $1 million. The plan would also increase the required holding period to qualify for the lower long-term capital gains tax rate. Estate tax exemptions would be reduced—from the current $10.9 million to $7 million for a married couple. According to estimates from the Urban-Brookings Tax Policy Center, 95% of all taxpayers would see almost no change in their tax liability based on Secretary Clinton’s plan.
On the corporate side, Clinton would impose an “exit tax” on companies that attempt to relocate outside the US. The proposal also calls for rule changes that would make it harder for corporations to employ tax inversion—shifting legal domicile in order to reduce taxes—and would limit the deductibility of interest as a tool to lower tax bills.
Clinton would pursue a plan to create an easier path to citizenship for illegal immigrants living in the US. In terms of foreign trade, she plans to rework the Trans-Pacific Partnership (TPP) trade agreement that the current administration negotiated. Clinton would continue the regulatory policies of the Environmental Protection Agency, maintain strict regulations and capital standards for the financials sector, and include a public option for healthcare.
Bottom line: If the economy’s number one problem is low growth, this balanced program of tax and spending increases would not do much to lift that lack of demand, because private sector activity would likely be reduced by roughly the same amount as public sector demand would be increased. However, if the main problem is income and wealth inequality, this plan would seem to provide some remedy.
TRUMP’S ECONOMIC PLAN: AMBITIOUS—BUT TRADE IS A RISK
Trump’s economic plan is expansive—but its balance is a question mark.
The main cog is a big, broad-based tax cut. The tax plan is estimated to reduce federal revenue by $9.5 trillion over a 10-year period. The proposal would consolidate the current seven tax brackets into three (10%, 15% and 25%). And it would eliminate both the alternative minimum tax and estate tax. According to analysis by the Urban-Brookings Tax Policy Center, upper-income taxpayers would see a smaller overall tax bill; 45% of all taxpayers would see little or no change in their tax liability.
For the business sector, Trump has proposed a reduction of the top corporate tax bracket from 35% to 15%, and the elimination of a wide range of business deductions.